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DECISION No.154/1998/QD-NHNN14 OF APRIL 29, 1998 PROMULGATING THE REGULATION ON CO-FINANCING BY CREDIT INSTITUTIONS

THE GOVERNOR OF THE STATE BANK

Pursuant to the Ordinance on the State Bank of Vietnam and the Ordinance on Banks, Credit Cooperatives and Financial Companies promulgated by Order No.37/LCT-HDNN8 and Order No.38/LCT-HDNN8 of May 24, 1990 of the Chairman of State Council of the Socialist Republic of Vietnam;

Pursuant to Decree No.15-CP of March 2, 1993 of the Government on the tasks, powers and State management responsibilities of the ministries and ministerial-level agencies;

Pursuant to the current credit regulations and provisions on guaranty issued by the Governor of the State Bank;

At the proposal of the Head of the State Bank's Credit Department,

DECIDES:

Article 1.- To issue together with this Decision the Regulation on co-financing by credit institutions;

Article 2.- This Decision takes effect 15 days after its signing; all provisions contrary to this Regulation are now annulled.

Article 3.- The Director of the State Bank Governor's Office, the head of the Credit Department, the heads of the units attached to the central State Bank, the directors of the provincial/municipal State Bank's branches, the general directors (directors) of credit institutions shall have to implement this Decision.

For the Governor of the State Bank

Deputy Governor

DUONG THU HUONG

REGULATION ON CO-FINANCING BY CREDIT INSTITUTIONS

(Issued together with Decision No.154/1998/QD-NHNN14 of April 29, 1998 of the Governor of State Bank)

I. GENERAL PROVISIONS

Article 1.- Co-financing by credit institutions (CIs) (hereafter in this Regulation referred to as co-financing) is the process of lending-guaranteeing a project by a group of CIs (two or more), with a CI acting as the coordinator among the financing parties to raise the capability and effectiveness of production-business activities of enterprises and CIs.

Article 2.- The co-financing parties shall have to reach agreement on the mode of project evaluation, may set up a joint evaluation council or not but must ensure that the lending (guaranty) is strict and convenient and at the same time manage the project after providing loan (guaranty) so as to regularly and periodically inspect the co-financed party and handle arising problems.

The agreement on the mode of project evaluation and management must specify the responsibility of each CI in each case: evaluation through the joint evaluation council or unilateral evaluation (in case a joint evaluation council is not available) for co-management or unilateral management of the project.

Article 3.- Forms of co-financing in this Regulation shall include:

1. Consolidated loan;

2. Guaranty and re-guaranty;

3. Combination of the above forms.

Article 4.- Co-financing shall apply in the following cases:

1. The demand for loans or guaranty to implement the project exceeds the maximum limit allowed for lending or guaranteeing by a CI;

2. There's a demand to distribute risks among CIs;

3. Capital sources of one CI fail to meet the capital demand of the project.

The currency used for co-financing may be VND or a foreign currency, depending on the demand of the project and according to the relevant provisions on the management of foreign exchange.

Article 5.- CIs entitled to participate in or organize co-financing shall include:

- Commercial banks;

- Investment and development banks;

- Joint venture banks;

- Branches of foreign banks;

- Central people's credit funds and financial companies are entitled to participate in co-finance but not allowed to organize it.

Article 6.- Scope of co-financing:

The co-financing shall be effected when there is a demand for loan or guaranty for short-, medium- and long-term investment in projects.

Article 7.- Parties involved in the relationship of in co-financing:

1. Co-financing party: The co-financing party is composed of 2 or more members, each of which is a CI or a CI's branch authorized by the CI's General Director (Director) (as stipulated in Article 5). These members shall take part in capital contribution, provide direct loan or guaranty in order to jointly finance a project with certain amounts of money mutually agreed upon through the signing of a co-financing contract.

The co-financing members shall themselves select the coordinating CI, which may be a CI or branch of a CI where the enterprise that needs the loan or the guaranty opens its payment deposit account. All credit and guaranty relations between the co-financing party and the co-financed party shall be effected through the coordinating CI.

2. Co-financed party: is a legal person or an individual that needs the loan or the guaranty and is provided with loan or guaranty by the co-financing party in accordance with the provisions of this Regulation for the implementation of the project.

Article 8.- Capital sources for co-financing:

The co-financing members shall use their own capital sources, mobilized capital and/or borrowed capital to participate in the co-financing.

Article 9.- The level of capital set for each member to participate in co-financing (for both lending and guaranty) shall be agreed upon by the co-financing parties but must not exceed the lending and/or guaranty limits for a customer of such CI according the provisions of law.

Article 10.- Principles and conditions for the consideration of co-financing, the determination of co-financing objects and duration and the lending interest rates or guaranty charge, conditions on pledge, mortgage and/or guaranty shall comply with the current regulations and provisions on credit and guaranty issued by the Governor of the State Bank and with this Regulation.

Article 11.- The coordinating CI shall be entitled to the arrangement charge on the basis of mutual agreement between the co-financing members. The levels of charge shall be calculated on the basis of reference to international practices or based on the percentages of the interest rate fixed for the co-financing of the project.

II. SPECIFIC PROVISIONS

Article 12.- Proposal on co-financing for a project:

When a legal person or an individual wants to borrow money or to have a guaranty, it/he/she shall have to send a requesting dossier to the CI it/he/she is having the credit relation; the involved CI shall make a preliminary evaluation and if it deems that the project is feasible and needs the co-financing, it shall project the CIs with co-financing capabilities, invite them to participate therein, and at the same time send them the preliminary evaluation's results. An invitation for the co-financing should state clearly the form, duration, interest rate, charge and amount of money proposed for participation in co-financing the project.

Article 13.- Coordination in co-financing:

Within the time proposed by the co-finance inviting CI and after studying the enterprise's dossier requesting a loan, the invited CIs shall have to reply in writing, clearly stating its consent (or refusal) to participate in the co-financing. If wishing to participate in the co-financing, the invited CI shall have to give reply to the specific proposals of the inviting CI. In case there are not enough CIs to participate in the co-financing, the inviting CIs may send its invitation to other CIs. After the invitation to the co-financing (not more than two rounds), if:

- The co-financing has already been agreed upon, the participating CIs shall evaluate the documents and dossier requesting loan(s), sent by the borrowing party so as to decide the lending.

- If the co-financing has not been agreed upon, the CI that receives the enterprise's dossier shall:

+ Re-consider the possibility of unilateral financing; if the demand for capital or guaranty does not go beyond the limits prescribed by law and there're enough capital sources for the finance, it may decide the financing.

+ Inform the enterprise of the incapability to provide loan or guaranty, even in the form of co-finance, if it is unable to undertake the unilateral financing.

During the time of co-financing solicitation, the party that proposes co-financing may propose another CI to provide loan (guaranty) but only after consulting with and getting consent from the CI that has received its dossier.

Article 14.- Co-financing contract

1. A co-financing contract is a written commitment between the CIs participating in the co-financing to exercise the rights and fulfill the obligations of each CI in the whole process of lending- guaranteeing (co-financing) for the implementation of a project; the contents of the co-financing contract must comply with the provisions of law on economic contracts, the provisions of this Regulation and other provisions of law.

CIs participating in the co-financing shall have to reach agreement on the details of the pledge or mortgage of property, and on the guaranty for amounts of co-financing capital lent to the co-financed party.

2. All agreements, commitments and measures to settle disputes between co-financing members (co-financing parties) shall be stated in the co-financing contract.

3. Members participating in the co-financing shall have to jointly compile this contract and strictly abide by the clauses thereof.

The coordinating CI shall have to draft a credit contract (or guaranty contract), collect final opinions and get consent from the financing members; and represent the co-financing party to negotiate with the co-financed party.

4. Any breach of the contract shall be handled in accordance with the provisions of law.

Article 15.- Credit contract (or guaranty contract) between the co-financing party and the co-financed party:

1. Contents of the credit contract (or guaranty contract): Besides the contents similar to those of a bilateral credit contract (or guaranty contract) signed between CIs and the capital borrowing parties, the financing members' names, the amount of co-financing money and proportions as well as the financing mode of each member and the signatures of the financing members (excluding the coordinating CI) may be added thereto.

2. In case of lending capital with credit contract, the coordinating CI shall have to sign a lending contract with the co-financed party for each time of capital dispersion.

3. The coordinating CI shall, as agreed upon by the financing parties, perform all obligations and exercise rights of the co-financing parties towards the co-financed party, which are provided for in the credit contract (or guaranty contract).

Article 16.- Recovery of financing capital (principal and interests) (including cases where the CIs must provide compulsory loans for the performance of their guaranty obligation toward enterprises):

1. The co-financed party shall have to take initiative in paying debt (principal and interests) to the coordinating CI according to the agreed time-limit, or to a third party, which is already guaranteed by one or several co-financing CIs.

2. Upon the maturity of the debt (principal and interests), if the co-financed party does not pay the debt, the coordinating CI shall have to urge it to pay the debt. If the co-financed party fails to pay the debt (and there's no other agreement), the coordinating CI shall, as agreed upon by the co-financing CIs, exercise the rights provided for by law to recover their capital.

3. The co-financed party may pay the debt before its maturity but must notify the coordinating CI thereof in advance and get the latter's consent, unless it is otherwise stipulated in the contract.

Article 17.- Extension of debt, reduction of interest rate or co-financing charge:

The coordinating CI shall consult the co-financing members in dealing with the co-financed party's proposal on debt payment before its maturity, debt extension, reduction of interest rate or charges regarding debts under the co-financing in accordance with the stipulations of the State Bank.

Article 18.- Responsibilities to provide all necessary information related to the co-financing process by the parties involved in the co-financing relationship:

1. The co-financed party shall have to fully report its financial situation and operations to the coordinating CI for supervision and inspection after effecting the co-financing.

2. The coordinating CI shall have to promptly and fully inform parties of the results of inspection of the use of capital as well as all relevant information with a view to discussing and agreeing on handling measures to be taken when necessary.

3. The coordinating CI shall have to send copies of the co-financing contract and report the relevant situation to the State Bank (the Bank Inspectorate) for supervision and support when needed.

III. IMPLEMENTATION PROVISIONS

Article 19.- The CIs mentioned in Article 5 shall, beside jointly participating in the co-financing under the provisions of this Regulation, be allowed to join other CIs inside or outside the country in co-financing domestic projects on the basis of ensuring security for the sum of co-financing money.

Article 20.- Basing themselves on the Regulation CI's co-financing a project, the General Directors (Directors) of the CIs shall organize the implementation of this Regulation and issue specific guiding documents suitable to the characteristics of operations of each CI.

Heads of units attached to the central State Bank, directors of provincial/municipal State Bank's branches shall, on the basis of their assigned functions and tasks, have to direct and supervise the implementation of this Regulation.

Article 21.- Any amendment and/or supplement to this Regulation shall be decided by the Governor of the State Bank of Vietnam.

For the Governor of the State Bank

Deputy Governor

DUONG THU HUONG